10/Waterway Corp. is a medium-sized corporation specializing in quarrying stone for building construction. The company has longdominated the market, at one time achieving a 70% market penetration. During prosperous years, the company's profits, coupled witha conservative dividend policy, resulted in funds available for outside investment. Over the years, Waterway has had a policy ofinvesting idle cash in equity securities. In particular, Waterway has made periodic investments in the company's principal vendor ofmining equipment, Norton Industries. Although the firm currently owns 12% of the outstanding common stock of Norton Industries,Waterway does not have significant influence over the operations of Norton Industries.Cheryl Thomas has recently joined Waterway as assistant controller, and her first assignment is to prepare the December 31, 2025year-end adjusting entries for the accounts that are valued by the "fair value" rule for financial reporting purposes. Thomas hasgathered the following information about Waterway's pertinent accounts.1. Waterway has equity securities related to Delaney Motors and Patrick Electric. During 2025, Waterwaypurchased 95,000 shares of Delaney Motors for $1,330,000; these shares currently have a fair value of $1,504,000.Waterway' investment in Patrick Electric has not been profitable; the company acquired 50,000 shares of Patrick in April2025 at $18 per share, a purchase that currently has a value of $727,000.2.Prior to 2025, Waterway invested $22,322,000 in Norton Industries and has not changed its holdings this year. Thisinvestment in Norton Industries was valued at $21,538,000 on December 31, 2024. Waterway' 12% ownership of NortonIndustries has a current fair value of $22,212,000 on December 31, 2025.Prepare the entries for the Norton investment, assuming that Waterway owns 25% of Norton's shares. Norton reported incomeof $479,000 in 2025 and paid cash dividends of $106,000. (List all debit entries before credit entries. Credit account titles areautomatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles ancenter O for the amounts.)Account Titles and Explanation(To record revenue.)DebitCreditI

The equity method is used by investors to report the investment made by one company to another…

Prepare the entries for the Norton investment, assuming that Waterway owns 25% of Norton's shares. Norton reported income of $479,000 in 2025 and paid cash dividends of $106,000. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles ar enter O for the amounts.)

Prepare the entries for the Norton investment, assuming that Waterway owns 25% of Norton's shares. Norton reported income of $479,000 in 2025 and paid cash dividends of $106,000. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles ar enter O for the amounts.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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